The Integrated Reporting Movement Meaning, Momentum, Motives, and Materiality

An in-depth, enlightening look at the integrated reporting movement

The Integrated Reporting Movement explores the meaning of the concept, explains the forces that provide momentum to the associated movement, and examines the motives of the actors involved. The book posits integrated reporting as a key mechanism by which companies can ensure their own long-term sustainability by contributing to a sustainable society. Although integrated reporting has seen substantial development due to the support of companies, investors, and the initiatives of a number of NGOs, widespread regulatory intervention has yet to materialize. Outside of South Africa, adoption remains voluntary, accomplished via social movement abetted, to varying degrees, by market forces. In considering integrated reporting’s current state of play, the authors provide guidance to ensure wider adoption of the practice and success of the movement, starting with how companies can improve their own reporting processes. But the support of investors, regulators, and NGOs is also important. All will benefit, as will society as a whole.

Readers will learn how integrated reporting has evolved over the years, where frameworks and standards are today, and the practices that help ensure effective implementation—including, but not limited to an extensive discussion of information technology’s role in reporting and the importance of corporate reporting websites. The authors introduce the concepts of an annual board of directors' "Statement of Significant Audiences and Materiality" and a "Sustainable Value Matrix" tool that translates the statement into management decisions. The book argues that the appropriate combination of market and regulatory forces to speed adoption will vary by country, concluding with four specific recommendations about what must be done to accelerate high quality adoption of integrated reporting around the world.

ROBERT G. ECCLES is a Professor of Management Practice at the Harvard Business School. He has written four books on corporate reporting. He has also written over 25 articles and 20 teaching cases on integrated reporting and sustainability.

MICHAEL P. KRZUS is an independent integrated reporting consultant and researcher. He has provided advisory services to participants in the International Integrated Reporting Council Pilot Program, companies exploring the adoption of integrated reporting, and consulting organizations seeking to enhance integrated reporting capabilities for clients.

Foreword ix

Preface xiii

Acknowledgments xvii

Chapter 1: South Africa 1

The Uniqueness of South Africa 2

South Africa’s Journey to Integrated Reporting 3

South African Assessment of the South African Experience 10

Our Reflections on the South African Experience 18

Notes 18

Chapter 2: Meaning 31

Company Experimentation: Examples from the First Integrated Reports 32

Expert Commentary: The First Reflections on Integrated Reporting 40

Codification: Creating Common Meaning 44

Notes 51

Chapter 3: Momentum 59

Adoption 61

Accelerators 63

Awareness 78

Notes 80

Chapter 4: Motives 97

Companies 98

Audience 102

Supporting Organizations and Initiatives 106

Regulators 107

Service Providers 109

Notes 111

Chapter 5: Materiality 119

The Social Construction of Materiality 120

Materiality in Environmental Reporting 122

Comparing Different Definitions of Materiality 123

Audience 127

Governance 129

Materiality for Integrated Reporting 132

Notes 134

Chapter 6: The Sustainable Value Matrix 147

A Short History of the Materiality Matrix 147

Issues with the Matrix 150

The Current State of Materiality Matrices 152

From the Materiality Matrix to the Sustainable Value Matrix 157

Notes 165

Appendix 6A: Comparing the Ford and Daimler Materiality Matrices 173

Notes 177

Appendix 6B: Methodology for the Materiality Matrices Review 179

Note 189

Chapter 7: Report Quality 191

The Six Capitals 192

Content Elements 194

Special Factors 200

Assurance 207

Notes 209

Appendix 7A: Methodology for Analyzing 124 Company Integrated Reports 221

Notes 223

Chapter 8: Reporting Websites 225

Methodology 226

Website Category Analysis 227

Website Feature Analysis 233

Three Examples 241

Notes 246

Appendix 8A: Methodology for Website Coding 253

Chapter 9: Information Technology 261

Integrated Reporting Processes 262

Four IT Trends 265

Contextual Reporting 269

(World Market Basket) 271

Notes 274

Chapter 10: Four Recommendations 281

A Very Brief History of Financial Reporting 282

Balancing Experimentation and Codification 283

Balancing Market and Regulatory Forces 285

Greater Advocacy from the Accounting Community 287

Achieving Clarity Regarding the Roles of Key Organizations 289

A Possible Scenario 290

Final Reflection 292

Notes 292

About the Authors 299

Index 301

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